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to restructure the provision of health care in the United States
in 1994 by the Federal Government, including the creation of some
form of national health insurance.
Against this backdrop, petitioners concluded that practicing
medicine as independent or small group practitioners using an IPA
would no longer be economically viable for them. Instead, they
decided, it would be advisable to affiliate with a larger health
care organization such as an HMO or a hospital. Affiliation with
a larger organization provided a more secure means to practice
medicine in a managed care environment, in petitioners' view, as
it would provide them with a larger patient base for spreading
the risk of loss being transferred to them by health insurers,
greater capital resources for the same purpose, the benefits of
greater bargaining leverage in negotiating managed care
contracts, and greater efficiencies and economies of scale in
providing care.
To facilitate the affiliation, it was also decided that
certain of the UHMG member physicians, including petitioners,
should form a medical group.9 Unlike an IPA, a medical group
involved the consolidation of the member physicians' medical
practices, so that patient revenues were pooled, expenses were
shared, and salaries were paid to member physicians. The newly
9 Not all members of the UHMG IPA were asked to join the new
medical group, for various reasons, including that his or her
medical specialty, or personality and/or practice style, was not
perceived to be a good fit.
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Last modified: March 27, 2008